Overall there is nothing wrong with the distributor model. However when distributors monopolise the market and charge excessively high prices then nobody should be surprised when people start buying onlne at vastly reduced prices. If distributors dropped their prices and LBS prices came back into line with 10-20% more than online prices then suddenly LBS sales would pick up.

In some retail sectors this has happened and you don't see the same success of online sales. In bikes, this is still not the case.

human909 wrote:Overall there is nothing wrong with the distributor model. However when distributors monopolise the market and charge excessively high prices then nobody should be surprised when people start buying onlne at vastly reduced prices. If distributors dropped their prices and LBS prices came back into line with 10-20% more than online prices then suddenly LBS sales would pick up.

In some retail sectors this has happened and you don't see the same success of online sales. In bikes, this is still not the case.

I disagree, the distributor model no longer works in a global market. By its nature it adds a minimum margin of at least 25-35% to products.

jcjordan wrote:I disagree, the distributor model no longer works in a global market. By its nature it adds a minimum margin of at least 25-35% to products.

How does a glorified warehouse add 25-35% to products?

A "distributor model" has been in existence for several millennium. The global market is PRECISELY why a distributor model is used! In fact wiggle, amazon and other mammoth online 'retailers' have more things in common with distributors than traditional retailers. The retail shopfront is only the surface that the customers see. The logistics and behind the scenes operation of a mammoth online retailer is essentially that of a distributor BYPASSING the small retailer.

Small retailers are inefficient, often HOPELESSLY inefficient in my direct experiences. This sort of wastefulness deserves to die the death that is coming to many. Those that will survive are retailers that offer clear advantages to their customers in terms or customer service or shopping experience. LBS actually are in a far better position than many retailers. At least bikes need servicing. A bike service store that meets their customer's needs has little to worry about.

Difference b/n Amazon and Australian distributors in the present globalised economy? These _small_ Australian distributors are inefficient, typically COSTLY inefficient in my direct experience. It's useful for product companies to spread their reach worldwide without large investments, but it's incomparable in terms of cost to consumers when there are global alternatives (mail order/Amazon). Fact is, the present distributor model will have to significantly alter or further suffer the consequences.

Difference b/n Amazon and Australian distributors in the present globalised economy? These _small_ Australian distributors are inefficient, typically COSTLY inefficient in my direct experience. It's useful for product companies to spread their reach worldwide without large investments, but it's incomparable in terms of cost to consumers when there are global alternatives (mail order/Amazon). Fact is, the present distributor model will have to significantly alter or further suffer the consequences.

I completely agree with this too. Australian distributors in many industries operate inefficiently and charge monopoly rents. Again this is why on line shopping is so much cheaper currently.

With good online access and cheap mail I see no reason why the trend towards online shopping wont continue in many areas. This is an excellent thing, I welcome the death of inefficient retailer who provide little service for their customers.

Um, just where is this protectionism you think I am asking for? Please point it out, don't just say I am asking for it, then not backing up. I went to the customs website and backed up my argument.

All I am asking for is a level playing field, if one group of retailers can have a duty/tax free threshold, then why not the others.

If I was saying hey, help the aussie retailer by restricting trade from overseas shops then you would be right, but I'm not, I'm just saying treat them both exactly the same. The country has a consumer tax, the gov't should administer it fairly and evenly, not allow huge loopholes.

My agenda is to educate the public that the retailers are just asking for a level playing field tax wise, all the other stuff about current distribution models and past and present undergoing rapid change, well it should not affect a fair tax policy, all that stuff I am absolutely so happy to see, I think it's great, the aussie consumer has been ripped off their entire lives.

Again, please back up where you think I am asking for protectionism, I am more than happy to be proved wrong.

jcjordan wrote:I disagree, the distributor model no longer works in a global market. By its nature it adds a minimum margin of at least 25-35% to products.

How does a glorified warehouse add 25-35% to products?

A "distributor model" has been in existence for several millennium. The global market is PRECISELY why a distributor model is used! In fact wiggle, amazon and other mammoth online 'retailers' have more things in common with distributors than traditional retailers. The retail shopfront is only the surface that the customers see. The logistics and behind the scenes operation of a mammoth online retailer is essentially that of a distributor BYPASSING the small retailer.

Small retailers are inefficient, often HOPELESSLY inefficient in my direct experiences. This sort of wastefulness deserves to die the death that is coming to many. Those that will survive are retailers that offer clear advantages to their customers in terms or customer service or shopping experience. LBS actually are in a far better position than many retailers. At least bikes need servicing. A bike service store that meets their customer's needs has little to worry about.

It's quite simple.

Consider that a distributor needs to order a minimum amount of goods from a manufacture and try and decide what customers are likely to want over the period before the next order, around 3-6 months. So probably $200000 each from 2-3 different manufactures. So they either need to have that 1/2 million in cash or have to borrow it. Consider that each of those manufactures are going to want payment within 30 days and you will most likely not see any return on sales to the LBS for at least 45-60 days that's a fair chunk of interest and that assumes that you sell all of the shipment. Shimano still has 8 speed duration ace cassettes in stock.

During all this they also have to pay utilities, wages, superannuation, PAYE, and all those other costs. Plus try and make a margin of profit.

Then you add this to the same for a LBS and the consumer bears the costs.

jcjordan wrote:I disagree, the distributor model no longer works in a global market. By its nature it adds a minimum margin of at least 25-35% to products.

How does a glorified warehouse add 25-35% to products?

It's quite simple.

Consider that a distributor needs to order a minimum amount of goods from a manufacture and try and decide what customers are likely to want over the period before the next order, around 3-6 months. So probably $200000 each from 2-3 different manufactures. So they either need to have that 1/2 million in cash or have to borrow it. Consider that each of those manufactures are going to want payment within 30 days and you will most likely not see any return on sales to the LBS for at least 45-60 days that's a fair chunk of interest and that assumes that you sell all of the shipment. Shimano still has 8 speed duration ace cassettes in stock.

During all this they also have to pay utilities, wages, superannuation, PAYE, and all those other costs. Plus try and make a margin of profit.

Then you add this to the same for a LBS and the consumer bears the costs.

You are not responding to the question all you are doing is listing some of the costs distributors face. Sure they need a margin to cover this and provide profit but there is no suggestion this needs to be "25-35%". (In some industries it may be more, in others vastly less.)

Furthermore the for the reasons that you yourself touch on, there are currently no reason that the "distributor model" is going to disappear. Smaller retailers have absolutely no desire in holding large stock and manufacturers have no interest in selling in small volume. That is exactly the reason why distributors have existed in the past, present and foreseeable future. The online & global world hasn't changed this. What has changed is the need for the local shop front for many things and many customers. In terms of logistics, costs, negotiating power and margins Amazon, Wiggle etc are much more similar to a distributor with a shopfront than a retailer with a warehouse. But again, not all this is new. For centuries manufacturers and distributors have long operated somewhat at the retail level, be it a 'factory outlet' or farm gate sales.

For what its worth I'll list a few personal experience items:In my somewhat recent retail experience margins were generally ~50% (100% markup), items were prices at RRP. However for items that were bought bypassing the "traditional distributors" the margin was ~66% (200% markup). This gives a comparable distributor margin of 33% (50% markup). The bypassing of traditional retailers were essentially a buying group which game economies of scale but all the order risk was held by the retailers. The reason why this worked was that there were NO local distributors for these brands and because local monopoly margins were so high on brands that were available. You always know that something suss is going one regarding monopoly margins when overseas companies are explicitly banned on shipping certain brands to Australia due to manufacturer rules!

Consider that a distributor needs to order a minimum amount of goods from a manufacture and try and decide what customers are likely to want over the period before the next order, around 3-6 months. So probably $200000 each from 2-3 different manufactures. So they either need to have that 1/2 million in cash or have to borrow it. Consider that each of those manufactures are going to want payment within 30 days and you will most likely not see any return on sales to the LBS for at least 45-60 days that's a fair chunk of interest and that assumes that you sell all of the shipment. Shimano still has 8 speed duration ace cassettes in stock.

During all this they also have to pay utilities, wages, superannuation, PAYE, and all those other costs. Plus try and make a margin of profit.

Then you add this to the same for a LBS and the consumer bears the costs.

You are not responding to the question all you are doing is listing some of the costs distributors face. Sure they need a margin to cover this and provide profit but there is no suggestion this needs to be "25-35%". (In some industries it may be more, in others vastly less.)

Furthermore the for the reasons that you yourself touch on, there are currently no reason that the "distributor model" is going to disappear. Smaller retailers have absolutely no desire in holding large stock and manufacturers have no interest in selling in small volume. That is exactly the reason why distributors have existed in the past, present and foreseeable future. The online & global world hasn't changed this. What has changed is the need for the local shop front for many things and many customers. In terms of logistics, costs, negotiating power and margins Amazon, Wiggle etc are much more similar to a distributor with a shopfront than a retailer with a warehouse. But again, not all this is new. For centuries manufacturers and distributors have long operated somewhat at the retail level, be it a 'factory outlet' or farm gate sales.

For what its worth I'll list a few personal experience items:In my somewhat recent retail experience margins were generally ~50% (100% markup), items were prices at RRP. However for items that were bought bypassing the "traditional distributors" the margin was ~66% (200% markup). This gives a comparable distributor margin of 33% (50% markup). The bypassing of traditional retailers were essentially a buying group which game economies of scale but all the order risk was held by the retailers. The reason why this worked was that there were NO local distributors for these brands and because local monopoly margins were so high on brands that were available. You always know that something suss is going one regarding monopoly margins when overseas companies are explicitly banned on shipping certain brands to Australia due to manufacturer rules!

Would you risk $100,000 of your own money for the chance to get 30,000 back in six months time? Twelve months?

Or more realistically, would you borrow $100k at 10% interest for a chance to get a 30% return... Minus your input costs?

I dare you to do it. Then report to us on how fun a time you made money hand over fist.

I love how the Internet give dimwits a place to whinge about business practice when they've never tried to run one themselves. Like being able to save a few bucks buying from CRC gave them a worldly outlook on commerce and economics.

ThePhil wrote:Um, just where is this protectionism you think I am asking for? Please point it out, don't just say I am asking for it, then not backing up. I went to the customs website and backed up my argument.

I bought my bike from LBS and first pair of shoes Then some bits from UK internet. Just shopping online again for more bit's. LBS's not even close I went out to try and give them the opportunity of business but everything at RRP. I don't haggle with them just use the Frugal app while browsing. However I do not take up their time for advice, try on etc. That is not fair. IMO.

Would and will buy locally if they had a Wiggle price match sticker in the window. Sink or Swim is very true.

I have been a regular internet buyer for years, never had any issues. Just bought something from Amazon USA despite it being only $10 less than Hardly Normal because the colour I wanted was not available in AUS, add postage it cost me $20 more, but I got what I wanted. International companies and importers treat Australia like idiots, less choice and more profit. And GST on books, are you kidding me!!! Tax on learning.

boss wrote:I love how the Internet give dimwits a place to whinge about business practice when they've never tried to run one themselves. Like being able to save a few bucks buying from CRC gave them a worldly outlook on commerce and economics.

So not only are you being offensive and insulting but you have obviously not read or have misinterpreted what I have written. I'm not whinging about any business practices.

boss wrote:I love how the Internet give dimwits a place to whinge about business practice when they've never tried to run one themselves. Like being able to save a few bucks buying from CRC gave them a worldly outlook on commerce and economics.

So not only are you being offensive and insulting but you have obviously not read or have misinterpreted what I have written. I'm not whinging about any business practices.

It wasn't directed at you but Jordan.

I am not sure if you insinuated that 30% margin is some super-profit and that a distributor/wholesaler cannot justify it... He did. I invite you to open and run your own business and see how far you go.

I would consider a 30% margin to be very slim pickings. The bicycle industry isn't a gravy train as many try and assert. I've posted many times about it, and can't be bothered wasting the energy and topics like this come up over and over again, or get revived with little consideration for what has been written previously.

Last edited by boss on Mon Jan 07, 2013 10:22 pm, edited 1 time in total.

ThePhil wrote:Um, just where is this protectionism you think I am asking for?

Unless I'm mis-reading you, you're asking the Government to increase taxes on imports, aren't you? That's what this thread is about, isn't it?

Yea but only to the same level as for the local guys, not more.

Or would you rather that they abolish the GST?

As long as they just levelled the playing field I don't really care how they do it, but yes, they could say, OK we will make GST and duties exempt for all sales under $1,000, overseas or local, it's their tax system.

Mulger bill wrote:Pity AU retailers weren't thinking of the lives of local manufacturing workers all those years back when they discovered cheap Asian importsThat's the real issue here. The gravy train has run out of steam. The honeymoon is over. The true global marketplace is here. It's "sink or swim".

Well the Government and unions are not thinking of the livelihoods of manufacturing workers by putting in a $1,000 duty exemption for overseas purchases. It's more like sink or swim and also hold onto this brick. I'm pretty surprised the unions can let down their members so badly.

human909 wrote:You are not responding to the question all you are doing is listing some of the costs distributors face. Sure they need a margin to cover this and provide profit but there is no suggestion this needs to be "25-35%". (In some industries it may be more, in others vastly less.)

Furthermore the for the reasons that you yourself touch on, there are currently no reason that the "distributor model" is going to disappear. Smaller retailers have absolutely no desire in holding large stock and manufacturers have no interest in selling in small volume. That is exactly the reason why distributors have existed in the past, present and foreseeable future. The online & global world hasn't changed this. What has changed is the need for the local shop front for many things and many customers. In terms of logistics, costs, negotiating power and margins Amazon, Wiggle etc are much more similar to a distributor with a shopfront than a retailer with a warehouse. But again, not all this is new. For centuries manufacturers and distributors have long operated somewhat at the retail level, be it a 'factory outlet' or farm gate sales.[/i]

Ok, let me expand. Its these increased costs, along with the limitations of the model, which is why our market has such a price difference.

As you point out smaller retailers don’t want to hold massive stock and don’t need to. Look at the model that Trek now uses. They dropped distributer model here in Australia and it has done them no end of good. They now have a small team of employees here in Australia whose primary role is to undertake marketing and warehouse activities. They also handle a few aspects in regards to warranty and repairs (they can replace Madone drop outs in house). All stock is considered as inner company transfers (yes they still pay import duties) and as such no extra money is needed by a ‘distributer’ to buy stock. This is a major cost reduction in terms of administration and billing, plus no extra level of profit needed.The LBS is also better off as they don’t need to make a huge order at the start of every season, which they then need to find a way to pay back before they have sold the stock, which also saves money. The end result was Trek was able to reduce the wholesale cost of bikes and as a result makes it easier for the LBS.Shimano could also go done the same line without any problems. Better yet supply like Wiggle/PBK does through online order and postage delivery.

human909 wrote:You always know that something suss is going one regarding monopoly margins when overseas companies are explicitly banned on shipping certain brands to Australia due to manufacturer rules!

[/i]

Mostly that is done to protect the distributer model. Dont forget that many of them pay for the privillage of being the distributure of the product.

ThePhil wrote:As long as they just levelled the playing field I don't really care how they do it, but yes, they could say, OK we will make GST and duties exempt for all sales under $1,000, overseas or local, it's their tax system.

You seem to have missed the point that the GST is practically immaterial in this discussion. Either that, or you're choosing to ignore it, because it has been pointed out to you several times.

The savings on most of the things I online buy ranges anywhere from 50% to 300%. I'm sure I'm not alone here. The 10% GST would have no influence over any of these purchasing decisions, so I don't see how any changes in that space could change anything.

ThePhil wrote:Well the Government and unions are not thinking of the livelihoods of manufacturing workers by putting in a $1,000 duty exemption for overseas purchases. It's more like sink or swim and also hold onto this brick. I'm pretty surprised the unions can let down their members so badly.

You seem like a very confused fellow. You're plucking at straws, going off on irrelevant tangents and re-writing history all at the same time.

No, the whole discussion is about GST, duties and import charges, I started the thread. Duty on bike parts is 5%, IPDC is $55 and gst is 10%. Take a $500 item for example, with a 30% mark up from crc it's $650. But if an Australian version of crc wanted to get that special thingo in for you it's $500 wholesale, then $25 duty, IPDC $55, then 30% mark up, $754, then add this immaterial GST, comes to $829, $179 over $650, thats 27.6%.

You seem to be getting confused or purposely lumping a whole lot of items into one big discussion, I'm just making sure that people know about the duty and taxes issue.

As I have said many times does not explain mark ups of 50-300%, there are other big changes going on as well.

With the duty I mentioned, it's not a tangent it is linked up with the $1,000 threshold, all the same thing, very important that if changes are made it is not just to the GST threshold but includes the duty and IPDC as well, you know that stop trying to ignore it.

I know the same few people have pointed out that they don't agree with me many times, but please show me your figures, I'm here showing how it is duty and taxes wise, others are making comments like, "and that's the end of the discussion", trying to re-write the discussion.

I would guess that those who are keen to kill off the discussion have a vested interest in keeping their current protectionism.

ThePhil wrote:No, the whole discussion is about GST, duties and import charges, I started the thread. Duty on bike parts is 5%, IPDC is $55 and gst is 10%. Take a $500 item for example, with a 30% mark up from crc it's $650. But if an Australian version of crc wanted to get that special thingo in for you it's $500 wholesale, then $25 duty, IPDC $55, then 30% mark up, $754, then add this immaterial GST, comes to $829, $179 over $650, thats 27.6%.

It still has to be balanced against the cost to the Oz Governemnt associated with collecting the aditional duties and charges. I just purchased parts (two cranksets, stem and headset spacers) from Bike 24 in Germany for which my credit card was charged just shy of AU$250. If duties and GST were charged on that then it would have added $99.25 to the bill and there'd have to be a mechanism for the Gov to collect this money from me either via Customs or AusPost and they'd both charge for the service (the latter quite considerably). There's no way they could collect that money at the point of purchase.

However, if I'd have bought those exact same parts locally from one of my preferred suppliers TBSM then the exact same parts delivered to my door would have cost me $423...that's another $75 on top of my Bike24 purchase plus its mythical local charges. So I'd STILL make the purchase from Bike24 anyway!!!

Frankly, the Gov would get no significant financial benefit from the investment required to reduce the import threshold and enforce these conditions (though it would be an economic windfall for whichever agency was charged with the collection of funds) AND it still wouldn't provide the consistent disincentive function that you still expect it to perform which would make it a double policy failure.

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